An Assessment of Random Audit--A New Department of Labor Program To Improve the Accuracy of Unemployment Insurance Benefit Payments

HRD-84-26: Published: Mar 30, 1984. Publicly Released: Mar 30, 1984.

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GAO assessed the Department of Labor's random audit program which was initiated to improve the accuracy of benefit payments under the unemployment insurance system.

In each participating state, a random sample of about eight unemployment insurance payments is selected for detailed weekly investigations and this provides the basis for estimating the extent, type, and cause of overpayments. GAO believes that the program is conceptually sound and should, if properly implemented, provide needed information. However, comparisons between states may not be meaningful, statistically reliable projections of a national overpayment rate cannot be made until all states have implemented the random audit, not all unemployment insurance claims are covered by the random audit, and overpayment rates tend to be understated. The results of the random audit program have generally confirmed that high overpayment rates exist. The principal identified cause for these overpayments is that claimants are not actively seeking work. In addition, there are limitations in the states' systems for detecting, preventing, and recovering overpayments. GAO believes that overpayments can be greatly reduced if Labor and the states effectively use the random audit information. In several states, the program is contributing to improved claims processing and overpayment control. However, others have not made substantial changes to improve their programs, principally because of Labor's initial passive role in seeking corrective actions. Concern exists as to whether the federal monitoring of the program in each state should be strengthened and whether the program should be expanded to include additional types of unemployment insurance claims.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: Labor replaced the Random Audit program with a more comprehensive and precise Quality Control (QC) program. States voluntarily implemented the program beginning on March 31, 1986, pending approval of the program's final regulations by the Office of Management and Budget. Labor regional staff assigned to monitor the QC program have been trained and provided with a monitoring handbook.

    Recommendation: The Secretary of Labor should direct the Assistant Secretary for Employment and Training to determine the adequacy of federal efforts to monitor the implementation of the random audit.

    Agency Affected: Department of Labor

  2. Status: Closed - Not Implemented

    Comments: The Federal Supplemental Compensation program was terminated in March 1985 and the Extended Benefits program was operating in only two states in July 1986. Accordingly, Labor took the position that it would not be cost-effective to implement this recommendation for such a limited application. Labor plans, however, to test alternative methodologies if economic conditions change.

    Recommendation: The Secretary of Labor should direct the Assistant Secretary for Employment and Training to determine and evaluate alternatives for assessing the extent, type, and cause of overpayments in extended benefits and federal supplemental compensation claims.

    Agency Affected: Department of Labor


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